MPs on Parliament’s Business and Trade Committee have said they have “serious concerns” about the government’s “inadequate” response to its proposals to improve support for helping small businesses “facing pressures comparable to the pandemic”.
Earlier this year, a report by the cross-party group of MPs said late payment, high street costs, tax burdens, energy prices and crime are among the major pressures faced by small businesses. They warned that these challenges are comparable to, and in some cases exceeding, those experienced during the Covid-19 pandemic.
The government has responded to the report’s recommendations but the committee today said it is “pushing back on a government response that “restates pre-existing schemes and commitments” and only fully accepts six out of 36 of the committee’s recommendations”.
The committee said it has “serious concerns” and called for an “urgent rethink and fresh proposals from government to ward off cost pressures that will only worsen otherwise”.
Since the report was published, the Federation of Small Businesses has described a new “cost crunch” as energy standing charges rise by 40%, business rates are expected to increase 52% over the next three years, while minimum wage and statutory sick pay costs also increase.
Late payment
On late payment of invoices, the committee welcomed the government’s action in bringing forward the Commercial Payments Bill, but said it needs to go further than the maximum payment terms of 60 days it is introducing.
“Small business owners told us repeatedly that 60 days was too long to wait”, the committee said. “We remain convinced of the need for government to increase its ambition and seek to enforce 30-day terms across the economy.”
Tax
On tax, the committee said the government has “not sufficiently engaged” in its recommendations for business rates, VAT and compliance and HMRC.
For business rates, it said the government’s response outlined the actions taken in the 2025 Autumn Budget but did not acknowledge that business rates for many sectors have increased. It called on ministers to “be brave about tackling this issue before more businesses and the associated economic growth are lost”.
The government also rejected the committee’s call to consider an online sales tax to tackle the disparity between online and bricks and mortar costs, and rejected proposals for restructuring VAT, with no new material to address reducing the cost to SMEs of tax administration.
Energy costs
Despite energy being a major cost pressure on business, the committee said the government ignored its call to focus on those who are currently ineligible for existing schemes and just outlined what it is already doing for energy-intensive industries.
Bogus self-employment
On bogus self-employment on the high street which the committee said is leaving legitimate hairdressers and barbers “unable to compete”, the government said in its 2024 general election manifesto that it would launch a consultation to create a “simpler framework” on the definition of workers, but the committee said the “government has again failed to provide an exact timeframe for when this consultation will take place”.
It added: “More concerningly, it only commits to a “targeted consultation on employment status”. It is unclear as to whether a “targeted consultation” will fulfil the manifesto pledge to “consult in detail” on moving towards a single status of worker.”
Liam Byrne MP, chair of the Business and Trade Committee, said:
“Small business is the backbone of Britain’s economy, but too many now feel they are carrying a burden that is becoming impossible to bear.
“When we published our report in February, we warned that many firms were facing cost pressures comparable to the pandemic. Since then, those pressures have only intensified.
“We welcome the government’s willingness to listen in some areas but too often it is repeating existing announcements, not confronting the problems businesses told us about first hand.
“Growth begins with small business. If Britain is serious about growing the economy, reviving our high streets and creating good jobs, we need a bolder, more ambitious plan to help small firms invest, hire and thrive. That is why we are asking ministers to think again and come back with a response that rises to the challenge.”